The Scenic City is a great place to be a landlord.
Chattanooga's diverse employer base, growing population, low property taxes and family-friendly atmosphere make it one of HomeUnion's 14 U.S. markets best-suited for investment in single-family rental properties, the real estate company announced.
"It's one of our good markets," HomeUnion CEO Don Ganguly said. The California-based company specializes in identifying favorable markets for single-family rental properties, then helps investors buy, rent and manage houses in those markets, even remotely.
"If I buy a $700,000 condo in California, I may be able to rent that out for $2,700 a month," Ganguly said. "But if you are going to spend $700,000, why not buy seven $100,000 houses and rent each one out for $1,000 a month?"
The company is now targeting Chattanooga and will keep an employee on staff in the city to manage clients' rental properties, Ganguly said. The company already manages properties in other cities in Tennessee, but this is its first foray into the Scenic City.
To identify top markets for clients, HomeUnion looks for several key ingredients, and Chattanooga has nearly all of them, Ganguly said. The company focuses on neighborhoods that have a fairly even mix of owner-occupied and rental homes. The city's recent population growth was another important factor, he added.
Those ingredients, coupled with the national housing market, create a very strong single-family rental market, Ganguly said. Nationally, millennials are not buying houses as soon or as much as past generations, and that's increased renting across the nation.
"The Millennial generation is in a lot of trouble," Ganguly said. "They have student loans, the salaries they earn are way under what they would have earned before, so they're not plunking down money on a house. They rent."
Single-family home rentals have been on the rise in Chattanooga for several years, said Wanda E. Chubbs, portfolio manager at River City Property Management. The Chattanooga company manages about 900 properties, and the bulk of those are single-family homes.
She said the company initially built its single-family portfolio during the recession, when homeowners had a tough time selling their properties. But now, she said, most rental homes are driven by either Chattanoogans leaving the Scenic City or new industries and employees moving into Chattanooga.
"People have to move, and if they don't sell their home, they don't want to leave it vacant, so renting is an option for them," she said. "And when people initially move into the city, you rent first so you can scope out the land and see what area of town you want to live in."
She said the city's apartment market - which has been very strong during the last couple years, doesn't have much of an impact on the single-family home rental market because the renters in each category are typically very different.
But one factor in apartment living that could impact single-family rentals is the city's rapidly rising rents. If the cost of living in an apartment is comparable or more expensive than living in a house, many renters will chose to live in a single-family home, Ganguly said.
"If you looka t the really young folks, a lot of them like to live in apartments, in the city, it's cool," he said. "But if given a choice, a family, if they can get a house with a backyard, they would much prefer that to an apartment."
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